PAGE Blog Business Weekly Magazine
The number of used cars being imported under different schemes are still on rise as more than 8,500 used vehicles were imported during just two months of the current financial year.
According to details, approximately 4,440 vehicles were imported in July 2016 and 4,076 were imported in August 2016. The break-up of imported vehicles in July shows that 2,408 cars below 800cc (1211 cars and 1197 cargo vans/pick-ups/jeeps) and 809 vehicles from 800cc to 1000cc were imported.
A total number of 715 vehicles from 1500cc to 1800cc including 35 non-hybrid and 680 hybrid were imported. In the above 1800cc category, total 508 vehicles (luxury, SUVs, trucks & busses, and LCVs) were imported.
Similarly, in the month of August 2016 vehicles of below 800cc (1,025 cars and 520 cargo vans/pick-ups/jeeps) and 775 from 800cc to 1000cc vehicles were imported. In the 1500cc to 1800cc category, 834 vehicles including 34 Non-Hybrid and 800 Hybrid were imported, while 404 vehicles in the above 1800cc category were imported in the said month.
Pakistan Automobiles Assemblers Dealer Association (PAMADA) has asked the government to look into this issue as upsurge in the import of used cars still continues.
“The government should probe the misuse of baggage and gift schemes for imports of used cars, which is resulting in huge losses to national kitty,” demanded Iqbal Shah, Chairman PAMADA. He expressed his profound concern on the issue and said: “we have grave concerns over the illegal and unchecked import of used cars right under the nose of FBR. Smuggled and non-duty paid motor vehicles are a very small part of illegal car imports and if the government is serious to counter the revenue loss it should stop the misuse of used cars import schemes. This is because it is increasing consistently as more than 54,000 units were imported in 2015-16 as compared to 30,000 units in the corresponding period last year.”
Iqbal Shah added that in the last 10 years, over 300,000 used vehicles have been imported into the country, capturing a prominent chunk of the market, while the surge of used cars is also responsible to some extent for the closure of plants of Hyundai, Nissan, Chevrolet, Fiat and Adam.
“The vehicles are imported as a noncommercial commodity and then openly sold against hard cash in the market. At an average value of Rs1.5 million per used car, this activity has generated grey economy of over Rs80 billion in 2015 alone,” he added.
Another problem, Chairman PAMADA added, is that the custom levies on second-hand vehicles are not applied ad-valorem. Instead, a fixed amount in US dollars has been notified under SRO-577, which includes custom duties, sales tax and withholding taxes on an arbitrary and unknown basis.
“These fixed duties are highly suppressed, causing loss of tax revenue to the government. This also effectively subsidizes imported used cars, causing serious damage to the domestic auto industry. This fixed duty is calculated on less than half the current market price of those cars, based on the monetary values that were set in 2005,” reasoned Mr Iqbal.
It is worth noting that national exchequer incurred a loss of approximately Rs43.728 million because of this amnesty scheme for smuggled motor vehicles as per FBR. To investigate the matter, an audit team of the Directorate of Post Clearance Audit was involved, which reportedly found a shortfall in the duties and taxes in over 500 files that had been quoted lower than the actual amount. This happened because the vehicles were assessed at a value lower than the actual assessable value provided by FBR.
The major cause of concern is that though the FBR is apprehensive about the low valuation of over 500 vehicles under amnesty scheme but is indifferent to the valuation differences for imported used cars resulting in the loss of billions of rupees to the national exchequer.